Here we go again. Another year, another series of stories about world markets, Chinese economic growth and the ASX.
Too much bad financial news can make people worry about their wealth, leading to poor decisions.
So when faced with a flood of information, first look at the financial news and understand which part of it you can control.
For instance, we can't control the Chinese economy, but we can control how we respond.
Let's look at it from the perspective of someone investing in shares, something most Australians do through their super.
If you read about the ASX indices going down, you may want to sell your shares or switch your super from equities to fixed interest.
But if you're in your 20s, 30s or 40s, your investment in shares is long-term and the real gains will come from staying in the market for as long as possible.
If you're close to retirement, you may want to switch to fixed interest and cash because you don't want your savings to erode.
In this case, return to your plan and speak to your adviser. Good retirement planning usually has three buckets: short-term money, medium-term investments, and long-term investments, usually equities and property.
Just as you should have short-term cash to cover up to two years of living – to get you through market downturns – you should try to hold your long-term investments so you make the gains when the markets return.
One way to stay in the market is to buy "defensive" stocks. There are certain managed funds that specialise in this and can be a good option if you want to invest in types of stock generally less volatile.
What else can you control?
You can pay the right amount of fees. If one superannuation fund charges you 1.8 per cent of your balance, and another charges you 0.8 per cent, that's 1 per cent you want compounding into your own wealth, not going to a fund manager.
You can also control your own cash provisions. If you're buying an investment property, can you get the rental income you need to control your cash flow? How many months can you afford your property without a tenant without running into trouble paying your other bills and expenses?
You should have a plan: either money set aside, or an emergency household budget that kicks in until the property is tenanted.
Another problem could be negative equity in your family home, usually created by overpaying for the property, a high loan-to-value ratio loan and falling markets. Remember that property is an asset you hold for at least 10 years, and if the market value suggests you have little or no equity, in most cases you should find a cheap mortgage and ride it out.
Most plans are propped up by income and when markets have a downturn, you have to ensure you have revenue. You can control your income by getting protection for it. Be sure you have an income protection insurance policy check regularly that it's up to date with your current earnings.
If none of it makes sense, and the news is scaring you, perhaps engage a financial coach to help with a plan and the basics of investing.
In the end, you control you. So what you really need is the knowledge to make informed decisions.